It is one of the main functions of a business organisation, which, aims at procuring and judiciously utilising the financial resources with a view to maximising the value of the firm thereby the value of the owners i.e., equity shareholders in a company is maximised.
It means maximising the Net Present Value (or wealth) of a course of action. The NPV of a course of Action is the difference between the present value of its benefits and the present value of its cost.
The maximisation of wealth is possible by making decisions of the firm to get benefits that exceeds cost. It takes into consideration the time and the risk of effected benefits. The wealth maximisation is not only for the shareholders but also for the stake holders
The WM goals advocated on the following grounds
It takes into consideration the long-run survival and growth of the firm
It is consistent with the object of owners economic welfare
It suggests the consistent dividend payments to the shareholders
The financial decisions result in the capital appreciation
It considers risk and time value of money
It considers all future cash flows, dividends and EPS